SouthernSun Asset Management, LLC, an investment management firm, released its “SouthernSun Smid Cap Strategy” fourth-quarter 2025 investor letter. A copy of the letter can be downloaded here. During the quarter, the SMID Cap Composite returned -3.72% on a gross basis (-3.89% net) compared to 2.22% for the Russell 2500 Index and 3.15% return for the Russell 2500® Value Index. The composite returned 5.19% on a gross basis (4.46% net) over the trailing 12 months compared to 11.91% and 12.73% for the indexes, ...

Core Viewpoint - Kinney Asset Management has significantly increased its investment in Avantor, making it the fund's largest equity position despite the company's recent financial struggles and stock price decline [1][2][3]. Group 1: Investment Activity - Kinney Asset Management disclosed a purchase of 470,000 shares of Avantor, increasing its position by approximately $4.52 million [1][2]. - The total position in Avantor now stands at about 1.85 million shares, valued at $23.03 million, representing 34.3% of the fund's reportable assets under management (AUM) [2][3]. Group 2: Company Financials - Avantor's stock price is currently $11.52, down 46% over the past year, underperforming the S&P 500, which has increased by about 16.5% during the same period [3]. - The company reported a revenue decline of 5% to $1.62 billion in the third quarter, primarily due to reduced demand in the biopharma sector [6]. - Avantor experienced a significant non-cash goodwill impairment of $785 million related to its distribution business, but still generated $268 million in adjusted EBITDA and $172 million in free cash flow [8]. Group 3: Company Overview - Avantor, Inc. is a global provider of essential products and services for the life sciences and advanced technology sectors, focusing on laboratory consumables and bioprocessing solutions [5]. - The company serves a diverse range of customers, including biopharma, healthcare, education, government, and advanced technology sectors across multiple regions [7]. Group 4: Management Outlook - Management has expressed optimism through restructuring efforts and a $500 million share repurchase program, indicating confidence in the company's future despite current challenges [9]. - The investment strategy of Kinney Asset Management suggests a focus on long-term recovery and normalized earnings potential for Avantor, rather than short-term fluctuations [10].

Financial Performance & Strategy - APi Group's net revenues for 2024 were $7018 million, with Safety Services contributing 68% and Specialty Services 32%[9, 10] - Adjusted EBITDA for 2024 reached $893 million, with Safety Services accounting for 75% and Specialty Services 25%[11, 12] - The company aims for a long-term target of 60% of net revenues from inspection, service, and monitoring activities[21] - APi Group targets an Adjusted EBITDA margin of 16%+ and $3 billion+ cumulative adjusted free cash flow through 2028[158] - The company anticipates approximately 5% organic growth and $250 million annual spending on bolt-on M&A, targeting 7%+ reported CAGR through 2028[146] Safety Services - Safety Services: North America holds the 1 market share in North American fire protection[45] - Safety Services: North America has achieved 19 consecutive quarters of double-digit organic growth in inspection revenues[48] - Safety Services: International is on track to deliver $100+ million in value capture opportunities and achieve a 15%+ adjusted segment earnings margin by 2025[70, 72] Specialty Services - Specialty Services reported a gross margin increase from 15.9% in 2022 to 19.7% in 2024[109] - Specialty Services backlog shows organic growth, reaching 7% in Q1 2025[112] M&A Strategy - APi Group has a proven acquisition strategy with nearly 150 transactions in the last 20 years[121] - Bolt-on acquisitions have been completed at an average adjusted EBITDA multiple of less than 6x each year[121]